Madigan takes charge

The speaker moves to clean up the pension mess

May 01, 2013

Illinois House speaker Michael Madigan is expected to back a new pension reform bill Wednesday in Springfield. (Chuck Berman, Chicago Tribune)

Back in May 2011, House Speaker Michael Madigan and Republican Leader Tom Cross introduced Senate Bill 512, the first stab at comprehensive pension reform that impacted state workers, teachers, university personnel and General Assembly members. The bill quickly lost momentum. Teachers unions colorfully described it as the blood-sucking vampire Dracula, whom they were able to "put back in his coffin."

We've got a message for Dracula: Welcome back. You look remarkably healthy. Can we grab you a beverage?

On Wednesday, Madigan is expected to advocate a new bill that resurrects many of the changes labor unions loathe but which are necessary to stabilize the pension system. In a 10-page preamble, his new bill lays out the state's stark financial plight. Without blaming the lawmakers who helped create this crisis, it begs the courts — which ultimately will decide the constitutionality of pension changes — to consider the state's hardship:

The General Assembly finds that the pension debt is so great, and the state's fiscal condition is so challenged, that it is unclear whether any set of actions by the state that do not include substantial reforms to its pension systems can result in the full payment of all promised benefits. The General Assembly finds that reforms in this amendatory Act of the 98th General Assembly are necessary to address the fiscal crisis without incurring further severe and irreparable harm to the public welfare.

Madigan's bill incorporates several reforms we have advocated on this page: requiring younger employees to work more years on the job and pay more toward their retirements; limiting compounded cost-of-living increases; and capping the portion of high salaries on which pensions are calculated.

Think of Madigan's proposal as a lightly modified version of a good plan previously offered by state Rep. Elaine Nekritz, state Sen. Daniel Biss and House Minority Leader Tom Cross.

The Madigan version similarly would limit the growth of cost-of-living adjustments, but with tweaks to benefit relatively low-wage retirees and those who work the greatest number of years in state government. A COLA loophole that unjustly benefits state legislators would be closed. Retirement ages for current employees 45 or younger would rise by as much as five years. Employee contributions would increase by 1 percent of salary on July 1, rising to 2 percent a year later. And to undo an especially egregious rip-off of taxpayers, the employees of union staffs, private education associations and other non-governmental groups would be excluded from the state pension system.

There's more, including improvements that would put Illinois' system more in line with common (and smarter) accounting and actuarial policies. And while one goal here is to preserve pensions for public employees, expect their unions to fight a provision that would prohibit bargaining units and governments in the system from negotiating any pension benefits. That would, for example, keep a union from saying to a governor, "We don't like what the Legislature did with our pensions. We want you to reopen our contract and give us a better deal."

We haven't yet seen actuarial projections on what Madigan's plan would save. But a source familiar with it tells us its impact would be close to Nekritz-Biss-Cross. That is, it would eliminate the state's $96.8 billion unfunded pension liability in 30 years. And it would reduce by roughly 40 percent the $397 billion that taxpayers currently are scheduled to pay into the pension system over the same three decades. Once fully implemented, the plan would reduce the burden of pension costs on the state budget by about $2 billion a year, a number that would rise over time. This year that pension burden totals $6.75 billion, for new contributions to the pension funds as well as payments on pension bonds from years when Illinois foolishly borrowed money to meet this basic operating expense. Once those bonds are paid off, Madigan's plan would divert a similar amount each year to reducing the unfunded liability.

The bill doesn't include the controversial "cost shift" that would have required school districts to pick up the costs of their retirees going forward. We supported that concept, but removing it gives suburban and downstate Republicans one less reason to vote "no."

Illinois cannot afford to put off pension reform. In the two years since Madigan and Cross introduced Senate Bill 512, the unfunded liability has jumped from $85 billion to that $96.8 billion. And those are conservative estimates.

We hope to see swift approval in the House. What would Senate President John Cullerton then do?

So far, Cullerton continues to push his own pension bill, which he believes follows the only constitutional path to reform. Cullerton's bill, however, doesn't do enough to dig the state out of its mess. Cullerton continues to meet with union leaders, hoping for a pension bill agreed upon by all sides. There's a word for that: a miracle.

Union leaders have been at the table, negotiating various forms of pension bills, for years. They won't budge. Time to move on without their blessing.

Speaker Madigan: Yes, you were present at the creation of many of the pension problems your bleak preamble explains. Undoing that damage also requires your leadership. Kudos for taking charge now.